Question
2. (4 points) Based on the information below about the production structure, explain whether the technology used in each part demonstrates constant returns to scale
2. (4 points) Based on the information below about the production structure, explain whether the technology used in each part demonstrates constant returns to scale (CRS) or increasing returns to scale (IRS) property. a. The total labor cost of production of Q units of a good is given by C(Q) = 6Q + 40 b. The total labor cost of production of Q units of a good is given by C(Q) = 160Q c. To produce a good, one needs to use capital K and labor L. The quantity Q produced using L units of labor and K units of capital is given by Q = 11(L)0.7 (K)0.4 d. To produce a good, one needs to use capital K, labor L, and electricity E. The quantity Q produced using L units of labor, K units of capital, E units of electricity, and C units of coal is given by Q = 60(L)0.2 (K)0.3 (E)0.3 (C)0.2
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started